Saudi Arabia may reduce energy and water subsidies for wealthy citizens among other reforms to diversify its economy
Saudi Arabia may reduce energy and water subsidies for wealthy citizens among other reforms to diversify its economy away from oil amid a sustained fall in prices, its Deputy Crown Prince Mohammed bin Salman was quoted as saying on Wednesday.
His interview with the New York Times also appeared to suggest he could foresee oil prices dropping far below their current level of around $45 a barrel.
The newspaper paraphrased the prince's reform plans, adding: "So even if oil falls to $30 a barrel, Riyadh will have enough revenues to keep building the country without exhausting its savings," but without making clear if that figure was its own or had been mentioned by Mohammed bin Salman.
The world's top oil exporter has previously said it was studying increases in domestic energy prices, the introduction of VAT and the installation of nuclear and solar power.
Low oil prices and expected deficits in coming years have spurred a new focus on reforms in the conservative Islamic kingdom with the aims of diversifying the economy away from a dependence on crude revenue.
"The key challenges are our overdependence on oil and the way we prepare and spend our budgets," he said in the interview.
Benchmark Brent oil futures eased on Wednesday to trade around $45 per barrel as the dollar strengthened and investor focus shifted back to a deep global supply glut.
The glut arose on the back of the U.S. shale oil revolution as well as a Saudi decision last year to persuade OPEC to keep the taps open to fight for market share with rival producers.
Besides reducing subsidies, the reforms might include imposing a value added tax (VAT) and taxes on unhealthy goods like cigarettes and sugary drinks, he was quoted as saying.
The newspaper reported that he also said he would privatise and tax mines and undeveloped land, and intended to reduce domestic oil consumption by installing nuclear and solar electricity capacity, without giving further details.
Mohammed bin Salman, who is also defence minister, heads a supercommittee on the kingdom's economy and development as well as a National Performance Centre that oversees efficiency in all government ministries.
Under King Abdullah, who died in January, Saudi Arabia privatised big state companies, opened main sectors of the economy to private and foreign investment, joined the World Trade Organisation and reformed labour laws.
However, economists say the government can do more to strengthen the role of Saudi nationals in the private sector economy, including via education reform, and to make the government more efficient.
In my opinion Saudis have to work hard on self reliance.Increasing its own Engineering & Manufacturing base is most essential.In this regard Technical collaborations and establishment of JVC will enhance the process.